When the Hedonic Treadmill hits Ludicrous Speed

If you are a reader of personal finance blogs, you have probably been introduced to the idea of the hedonic treadmill.

The concept, which I referred to in posts about having enough and financial freedom, essentially means that the benefits of lifestyle inflation tend to be short-lived as you rapidly reset your baseline to the new normal.

The shine of the new and improved object or experience tarnishes and the only way to get it back is to upgrade again. It can become a vicious cycle. Continuing to upgrade to more, bigger, and better things essentially has you on a treadmill going ever faster and you’re doing all you can to not fall flat on your face.

 

It’s not having what you want. It’s wanting what you’ve got” – Sheryl Crow, Soak Up the Sun

 

The problem is there will always be something better than what you’ve got. When you get something better, you’ll eventually want the best. When you get the best thing, you find out your boss has two of them. And he’s jealous of the guy who has more, or something he had never heard of but is actually better than what was thought to be the best!

I try to stay off the treadmill by keeping special things special as I outlined in Make it a Treat. It’s an important lesson to learn and your life will be better and your pockets fuller once you embrace the concept of the hedonic treadmill.

 

Further Reading on the hedonic treadmill:

 

Spending Millions Monthly

 

Perhaps you saw the headlines recently. Johnny Depp has been appearing in them regularly, and lately it’s been mostly negative press. Did you happen to read how he’s been spending his money?

 

Disney Castaway Cay

 

He sued his money managers who in turn filed a countersuit detailing why Mr. Depp is having money troubles. Some of the more outrageous findings are:

  • He has spent $75 million on 14 residences.
  • He spent $18 million on a 150 foot yacht.
  • He spent $3 Million to shoot Hunter S. Thompson‘s ashes from a cannon.
  • His 45 luxury autos, 70+ collectible guitars, art and memorabilia cost untold millions.
  • He has 40 employees on payroll earning nearly $100,000 a year on average.
  • Wine for personal consumption totalled $30,000 per month.
  • He has dealt with credit card debt, numerous overdrafts, and personal debts in the millions of dollars.

 

I think Johnny’s treadmill has been speeding up for years and the wheels started coming off when it hit “ludicrous speed.”

E-mail exchanges between financial advisor and him show just how out of touch Mr. Depp has become. Around the holidays, he wrote,

“i am doing my very best on holiday spending, but there is only so much i can do, as i need to give my kiddies and families as good a Christmas as possible, obviously within reason.”

I can’t help but wonder what “within reason” means to someone who reportedly burns through $2 Million a month.

 

Lessons from Johnny Depp

 

The number one lesson I take from the revelations is that any income can be overspent. In peak years, Johnny Depp earned $100 Million or more. Somehow, and it took Brewster’s Millions type spending, he was able to spend hundreds of millions of dollars.


I should point out that despite the lawsuits and bad publicity, it does not appear that he is destitute. This site estimates his current net worth at $200 Million although the bulk of that may very well be tied up in the assets he has purchased (homes, yacht, art, etc…)

But is he happy?

Circling back to that Sheryl Crow quote, I think it’s fair to say that a man who spends $2 Million a month is not content with what he’s got. He’s chasing more. Perhaps he’s chasing happiness.

I have no idea how happy the man is, but if I were to have gone through an expensive divorce, have my dirty laundry aired in a multimillion dollar lawsuit, and attracted the attention of the President’s Secret Service all over the course of a year, I don’t think I’d be a particularly happy camper.

I recently read that regardless of income, a survey showed that people consistently say their ideal income is 20% higher than their current income. Whether a person makes $30,000, $300,000, or $3,000,000 a year, we are programmed to believe more would be better.

I think we’d all be better off if we learned to happy wanting what we’ve got.

 


You’re still not using Personal Capital? Track all your accounts in one place like I do.


 

Have you found yourself spinning your wheels on a hedonic treadmill? Could you find a way to burn through millions upon millions of dollars per year? What would you do with that kind of money? Sound off below!

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42 comments

  • I’ve heard this story before, about so many different celebrities. Mr. Depp is just one example.

    The need for “more” is probably built into our DNA. The same DNA that drives us to eat to excess.

    Maybe there once was a very good reason for this behavior — those who hoarded the most food, acquired the best caves and other resources, survived the longest.

    Today, survival is no longer a factor. Most of us should be directing any excess into buying our financial independence, instead of living like kings.

  • I must disagree: all his expenses were not outrageous. What is one supposed to shoot Hunter S. Thompson’s ashes from, a slingshot? For the wine, it’s a huge difference if that $30k means 10 bottles at $3k each or 15,000 bottles of 2-buck chuck.

    Regarding income, I’m sure you’ve heard of that widely-cited study that one’s happiness increasing up to about $75k (I forget the exact number), and then plateaus above that. I would guess those people making $75k, the “perfect” income for happiness, wish that they had a bit more too. It seems to be human nature to covet more than we have; that’s why they threw a few commandments in there about it.

    Dr. C

  • hatton1

    Depps story reminds me of Michael Jackson’s story without the child molestation. It also reminds me of all the NFL players who bankrupt. There is something to be said for having a regular life without supporting a “posse”. I think as physicians the mistakes are made in the first few years out of residency. We all make some. Hopefully the readers here dismount the treadmill gracefully.

  • A Spaceballs reference? Your genius knows no bounds!

    I think the Hollywood community needs a PoF figure. An insider who can teach the benefits of pursuing a financially mature lifestyle. Hollywood on FIRE?

  • Call me non imaginative but I just can’t imagine spending all that money a year. We recently were at an all inclusive in Mexico and I did the math on how much it would cost to live at the resort. It was less then 75k a year. Couple in flights to similar resorts around the world and you’d be picturing the most expensive lifestyle yours truly could imagine. I wouldn’t do that one either since I enjoy traveling off the beaten path, but my definition of extreme spending doesn’t seem to go much beyond 100k a year and perhaps one expensive old fancy car.

  • I’m already FIREd but Mrs. Freaky Frugal and I only spend about $58K per year. We could afford to spend more but we don’t because there is nothing more that we really want.

    If we had a insane amounts of money like Mr. Depp, I guess we would spend a little more per year – maybe $100K total instead of $58K. But I seriously doubt I’d be any happier.

    For me, happiness is more tied to health, relationships, interesting experiences, and some sort of life purposes.

    • I like where your priorities lie.

      We’re in a similar spot — $62,000 last year as a family of four despite having the ability to spend a whole lot more.

      If money were essentially unlimited, sure, I’d spend a bit more freely, but at some point, I just don’t like being wasteful. I also recognize that dollars spend unnecessarily on myself could be used in better ways.

      Best,
      -PoF

  • Let’s not forget that Mr Depp is a product and spokesman for the world of consumerism. We think commercials affect our habits, imagine what he must feel. Plus he has been in this biz since he was very young and probably never had a normal life (i.e. Like Jackson as mentioned in the comments).

    Poor depp. He may be a nice guy but he sure comes off looking foolish.

    • I can’t put myself in his shoes, but I don’t exactly feel sorry for him, either. Apparently his first movie was Nightmare on Elm Street when he was 21.

      But I didn’t write this to single him out; as the comments have demonstrated, he is one of thousands of well paid actors / athletes / CEOs, etc… to walk this path.

      I just think is serves as a reminder that more money (or spending more money) is the answer, particularly for my readers, most of whom are making a six figure salary.

      Best,
      -PoF

  • Pretty crazy of course. We all think this is extreme but 99% of us face the same thing on a smaller scale. In fact, despite a few high profile bankruptcies, many of these big spenders can actually afford it better than the average person can afford their spending. But the key question is are they happier? Knowing that more spending probably won’t make you happy is the big first step.

    Try spending even less than you are used to. You’ll find it very difficult but then you might be surprised that you adjust after some time. Minimalism is one example. I’m buying less and have less and I’m both getting happier about it and spending less!

    Interestingly, this is extremely difficult for many people to believe. That shows you how ingrained our thoughts on spending are. More is better, and spending less than you’re used to is a “sacrifice”. The truth is different but it’s hard to believe. When you do, you’ll be way ahead of most people.

  • It’s always fascinating to me when people like him go so off the rails. So many actors have stories of living in their car or with 10 roommates, and although that does suck, why such extreme? There seems to be extreme “sadness” with the Hollywood or even sports life. I can’t explain it otherwise.

  • “To this day, I still haven’t touched one dime of my signing bonus or NFL contract money. I live off my marketing money and haven’t blown it on any big-money expensive cars, expensive jewelry or tattoos and still wear my favorite pair of jeans from high school”

    Rob Gronkowski, 2015

    http://www.businessinsider.com/rob-gronkowski-saves-nfl-salary-lives-off-endorsements-2015-6

    If this approach to money is good enough for Gronk, it works for me!

    Some superstars get it, others don’t . I wonder at what age Mr. Depp will look back and think “WTF!”

  • I guess this is one more reason not to work for a celebrity. Like so many people, they only want to hear ‘yes’ and they can get away with it for a while… Then you’ll all go down in flames together.
    I’ll keep my friends who’ll tell me the truth, thanks. But $100 Mil per year would be nice too!

  • Jason

    Johnny Depp is an artist and doesn’t think the way we all think. He’s very far off in artist land and doesnt spend any time thinking about practical matters like people who read financial blogs do. To him, our lives would seem endlessly dull and horrifying. He wouldn’t be as successful of an actor if he wasnt so extreme in his romantic lifestyle. He’s kind of in the live fast, die young category. It obviously seems insane to us, but the guy is worth hundreds of millions of dollars even with the foolish behavior. He must be doing somethj g right;)

  • EnjoyIt

    Some hedonism is OK right? So how do we avoid hedonic adaption that we can’t afford? I think the secret is to only add hedonism sporadically and incrementally as net worth increases and to never ever purchase it on credit.

    I think the problem these high income people fall into isn’t that they spend a lot. It is that they spend a lot on credit and increase their liabilities. Having 40 people on staff making $100k/yr is a $4 million/yr liability that has to come from somewhere. On the other hand if Mr. Depp built up his wealth and had $200 million in investment assets, maybe it would not be that big of a deal to spend $4 million on personal staff and another $4 million on living expenses. The reality is that if Mr. Depp lived like a resident in his 20s for a few years he would probably have no problem affording all this today and still have plenty of money.

  • Johnny Depp’s example may not be a very good one, and he has found ways to squander millions, but he is far from the only person wealthy or poor who have fallen prey to the need for more.

    More stuff, more money. Just more.

    When it comes down to it that need for more is often just a surface issue for people not content with their lives, striving to find some sense of happiness that the “more” can’t fulfill.

    It’s a vicious cycle to be always striving for more, only to attain it and find it doesn’t give you the happiness you desired.

    For me the happiness and contentment has come through my faith, family and friends and through trying to help others, however I can. For others it may take some different form, but I think that it’s an important thing to think about – figuring out how to be content wherever you are, and finding happiness in our foundational beliefs and the people we love, and not in unimportant things that really tie us down in many ways.

  • What would you do with that kind of money?

    I’m not entirely sure, but I’d sure like to try a year of it and figure it out!

  • This is a great concept to grasp. In my book, The Doctors Guide to Eliminating Debt, I talked about establishing a “Finish Line.” That is the point you no longer need to stockpile money for the future. Once you cross it, saving and accumulating is no longer useful. If everyone would establish a finish line, this ever expanding lifestyle would not be a problem. I talk about what to do once you cross the finish line in my upcoming book, The Doctors Guide to Smart Career Alternatives and Retirement.

    In the Johnny Depp example, he needs to establish a finish line. 14 houses is ridiculous. But common sense is not always common practice. If he wants to get very lavish, one house in the north for the summer, one house in the south for the winter, and one house in Hollywood for when he’s working. After that, I’m sure he could find a better use for his money that would help others and make him feel good. For example, becoming generous with family and paying off their houses.

    Advancing your lifestyle beyond ridiculous is definitely a problem with the high income population.

  • The thing that makes me most sad about the Johnny Depp situation (and the situations of so many other high income earners) is that the money he has wasted could have been used for so much good. Imagine if he’d taken even half of that money and donated it to charity! He could still have lived a ridiculously luxurious lifestyle while also doing something meaningful with his money.

    • CM

      It wasn’t wasted. Depp earned it and then put it back into the economy by employing an army of servants, and purchasing wine, cannons, and other important items. It became income for many others.

      A charity might have hoarded it.

  • I first read about the treadmill and its adaptation as a medical resident. My wife and I were going through a tough time and I started searching the happiness literature like I would normally search the medical literature on a new patient, with voracity! Turns out opposable thumbs and a large ratio of cerebral cortex to body mass aren’t the only adaptations human beings have evolved.

    This was a startling revelation that upon further consideration (and reflection at life) made absolute sense. It’s was always right there, but somehow people ignore this adaptation as I did. Acknowledging this “problem” was a life changer for my family and I.

    However, we did for a while, and still do, occasionally lapse and a few days or weeks later are painfully reminded that hedonic adaptation exists.

  • What would I do with that kind of money? I’d keep about 3 million (enough to provide a ridiculous $120k/yr lifestyle that we still wouldn’t be able to spend) and give the rest to worthy causes.

    After hearing all the stories of lottery winners that implode because they have no idea how to handle the drastic change of having that much money, I’d rather minimize to what we need (with a healthy margin) and give away the rest.

  • I cannot seem to relate with Mr Depp.
    As a fairly new attending I’m just trying to redeem myself from the negative networth category. Took one year out of residency for me to fall off the threadmill really quick to survive and/or ever achieve FIRE.

  • I think Johnny took the Method acting thing a little too far with the Mad Hatter.

  • Depp (never cared for him, not my type) seems like a YOLO kinda guy. I’m pretty sure that’s why he’s so popular. Reckless and bad boy-ish. That sort of a thing and his finances the same. He’s probably trying to fill a void like a lot of people in that industry. I still wouldn’t mind switching lives with him though!

  • If happiness peaks at $75,000 per year then using the 3% rule there would be no reason to accumulate any more than $2.5 million. Physician on fire, looks like you made it!

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